29 May 2014
EUR/USD: plenty of downside room - Scotiabank
FXStreet (Córdoba) - Camilla Sutton, analyst at Scotiabank commented that they expect the ECB to cut rates into negative territory, assuming there is no surprise in the flash CPI release on June 3rd. Meanwhile, she notes EUR/USD technicals are warning of potential downside risk.
Key Quotes
“Assuming there is no surprise in the flash CPI release we expect the ECB to cut rates into negative territory (the market is well prepared for this) with the potential of a targeted measure to help alleviate credit constraints”.
“WSJ, Brian Blackstone describes it well : “The lending channel matters: [at the weekend ECB conference] Mr. Draghi dwelled extensively on impaired and fragmented lending conditions in the euro zone. He highlighted ECB loans to banks and purchases of asset‐backed securities as steps that could play a ‘bridging role’ to keep credit flowing while banks repair their balance sheets”. These measures “could help reduce any drag on the recovery coming from temporary credit supply constraints,” he said.”
“EURUSD short‐term technicals: bearish—all studies are warning of potential downside risk; as spot trends lower and breaks to new multi‐month lows and below the 200‐day MA. For near‐term traders we favour short EUR positions; particularly as with the RSI at just 38 there is still plenty of downside room before the currency reaches oversold levels. Support lies at 1.3520”.
Key Quotes
“Assuming there is no surprise in the flash CPI release we expect the ECB to cut rates into negative territory (the market is well prepared for this) with the potential of a targeted measure to help alleviate credit constraints”.
“WSJ, Brian Blackstone describes it well : “The lending channel matters: [at the weekend ECB conference] Mr. Draghi dwelled extensively on impaired and fragmented lending conditions in the euro zone. He highlighted ECB loans to banks and purchases of asset‐backed securities as steps that could play a ‘bridging role’ to keep credit flowing while banks repair their balance sheets”. These measures “could help reduce any drag on the recovery coming from temporary credit supply constraints,” he said.”
“EURUSD short‐term technicals: bearish—all studies are warning of potential downside risk; as spot trends lower and breaks to new multi‐month lows and below the 200‐day MA. For near‐term traders we favour short EUR positions; particularly as with the RSI at just 38 there is still plenty of downside room before the currency reaches oversold levels. Support lies at 1.3520”.